IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR
(CIVIL DIVISION)
CIVIL SUIT NO. S-22-546-2009
BETWEEN
…PLAINTIFF
HENG LOK TEONG
AND
KANSAS CORPORATION SDN. BHD.
Judgment of Judicial Commissioner
Y.A Tuan Lee Swee Seng
Judgment
1
…DEFENDANTS
Prologue
Parliament has intervened to prescribe standard form Sale and Purchase
Agreement where one purchases a residential property from a housing
developer. It also covers shop houses. Recently that standard form
contract has been extended to cover service apartments built on
commercial land as well. However, in this case the purchaser had bought a
shop office in a non-standard form Sale and Purchase Agreement. Are
there pitfalls to avoid especially when there is delay in delivery of vacant
possession by the developer?
Parties
Plaintiff entered into a Sale and Purchase Agreement (SPA) dated
8.11.1996 to purchase a four storey shop office (the Property) from the
Defendant, a Developer for a purchase price of RM1,435,000.00. The said
property was to be completed within 36 months from the approval of the
Building Plans and the Building Plans was to be obtained within 12 months
from the date of the SPA. The Property was completed only on 18.2.2008
and the Plaintiff contended that that there had been a delay for which he is
now suing the Defendant for liquidated damages.
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Problem
There would generally be little problem obtaining summary judgment for
such a claim for a standard form agreement under Schedule G or H of the
Housing Developers (Control and Licensing) Regulations 1989. Our local
jurisprudence is replete with cases on that. However this development of
shop office is not covered by the standard form agreement. Different
Developers would have differently worded clauses to suit their own
particular development and needs.
One problem faced by the Plaintiff as purchaser is the date of
commencement of the calculation of the period of completion of 36 months.
He has first claimed the period from 8.11.1996 and so the date of delivery
of vacant possession would have been 8.11.1999 and since actual
possession was only given on 18.2.2008, he had claimed liquidated
damages based on Clause 20.2.1 for a delay of 3,022 days yielding a sum
of RM950,481.10 set out as follows:
RM1,435,000.00/365 X 8% X 3022 days of delay = RM950,481.10
However, he later realised that that would not be correct as under the SPA
the Developer is given 12 months to get the Building Plans approved and
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the period of completion runs from the date of approval of the Building
Plans. He then amended his Statement of Claim to now state that the
completion date is 8.11.2000 and hence the delay would only have been
2,627 days and the liquidated claim is RM826,245.45 .
In the light of the Plaintiff’s amendment to the Statement of Claim the
Defendant now amended its Defence to include a new paragraph 5.9 that
reads:
“It is a ‘condition precedent’ that the Building Plans are to be obtained
within 12 months from the date of the Agreement. As the Building
Plans was no obtained within the 12 months period the Agreement is
not valid as the partied could not fulfill the ‘condition precedent’.”
The Defendant had earlier pleaded that:
1. the Plaintiff’s claim is barred by limitation as more than 6 years have
lapsed from the date the Plaintiff’s cause of action is said to have
accrued on 8.11.2000 to date of filing of the action on 30.7.2009.
2. time for completion had become at large because of their failure to
obtain the Building Plans approval within the prescribed time stated
as a condition precedent;
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3. damages have not been proved as required under section 75
Contracts Act 1950;
Prayer
This is an application by the Plaintiff (vide Enclosure 5) for leave to enter
final Judgment against the Defendant as follows:-
(i)
damages for late delivery in the sum of RM 950, 481.10 from
8.11.1999 until 18/2/2008;
(ii)
interest at the rate of 8% on RM 950, 481.10 from 30.7.2009 until full
settlement;
(iii)
costs of the application; and
(iv)
further or other relief deemed fit by this Honourable court.
Prayer (i) was later amended as the Statement of Claim had been
amended to state a lower claim for damages for late delivery in the sum of
RM826,245.45 being a delay of 2,627 days from 8.11.2000 (actual date of
vacant possession) until 18.2.2008 (date of notice of actual possession).
Interest in prayer (ii) was also amended to be on the lower sum of RM
RM826,245.45.
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Principles
The following clauses would be relevant. Clause 20.2.1 of the said
Agreement provides that vacant possession of the said Property would be
handed over within 36 months from the approval of Building Plans and
further pursuant to Clause 2.1 of the said Agreement, Building Plans would
be obtained within 12 months from the date of the Agreement.
Clause 20.2.2 of the said Agreement provides that, in the event the
Defendant is unable to comply and deliver vacant possession of the said
property within the stipulated time as stated under Clause 20.2.1, the
Defendant would pay liquidated damages for late delivery calculated at the
rate of 8% per annum on the purchase price (RM1, 435,000.00) from day to
day from the actual date of vacant possession to the date of receipt of
notice of vacant possession of the said Property.
Plaintiff’s counsel, Ms. Heama Latha Nair, submitted that as the Defendant
had failed to confirm the actual date for the approval of the Building Plans,
the Plaintiff relies on Clause 2.1 of the said Agreement. Accordingly, the
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performance period is 36 months commencing 8/11/1997. Hence the
Defendant is obliged to hand over delivery of vacant possession on or
before 8/11/2000.
The Defendant’s notice of vacant possession was issued on 18/2/2008.
The Plaintiff exhibited in Exhibit H-2 Enclosure 5A a copy of the said notice.
Following Clause 20.2.2, there has been a delay of 2627 days from
8/11/2000 (actual date of vacant possession under the Agreement) until
18/2/2008 (date of notice for vacant possession). In the circumstances the
Defendant is obliged under the said Agreement to pay liquidated damages
to the Plaintiff in the sum of RM826, 245.45 calculated as follows:-
RM1, 435,000.00
------------------------
x 8% x 2627 days
=
RM826, 245.45
365
The Plaintiff through their solicitor’s Messrs Anthony, Chew & Lim issued a
demand letter dated 18/6/2009 to the Defendant has to date hereof failed,
refused and/or neglected to settle the said sum or any part thereof.
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The Plaintiff avers that the Defendant has no merits to the Plaintiff’s claim
and the defence filed herein is a sham.
Whether the Plaintiff’s claim is statute barred.
The Plaintiff’s counsel argued that the said claim is within the stipulated
time and not statute barred. Further, the computation of time is to run from
the date of the notice for delivery of vacant possession from the Defendant
to the Plaintiff i.e. from 18.2.2008 and not as stated by the Defendant as
running from 8.11.2000 which is the date as stated by the Plaintiff for the
expiry of the 36 months period.
The law on when a cause of action accrues for a case of failure to deliver
vacant possession has been settled by the Supreme Court in Insun
Development Sdn Bhd v.Azali bin Bakar [1996] 2 CLJ 753 at p.762-763
where the fine distinction in the words used for a claim of late delivery can
have a world of difference where limitation is concerned. The difference
between the words used for calculating late delivery in a standard form
Schedule G and H contracts and the non-scheduler type of agreement
have been explained thus by Edgar Joseph Jr. FCJ as follows:
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“The crucial question is: regard being had to the provisions of clause
18 of the agreement, when did the purchaser’s right to sue for the
agreed liquidated damages, for the delay hereinbefore mentioned,
accrue?
It is clear law, that in the absence of express contractual provision,
the purchaser’s right to sue for damages would accrue on the date of
the breach of contract (See Nasr i v. Mesah [1970] 1 MLJ 32, 34;
Reeves v. Butcher [1891] 2 QB 509, 511; Gibbs v. Guild [1881] 8
QBD 296, 302). But, the parties to a contract are free to regulate or
modify their rights in the event of breach thereof in such a manner as
to postpone the date of accrual of their right to sue for damages
which, of course, was what had happened in Loh Wai Lian.
In the present context, we have to consider whether there is any, and
if so, what material difference between the contract of sale in Loh Wai
Lian and the agreement here.
The obvious difference between the contract of sale in Loh Wai Lian
and the agreement here, which we consider to be most material, is
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this: under the former, the statutory formula for the calculation of the
indemnity was modified by expressly stating not only the terminus a
quo (the opening date) but also the terminus ad quem (the closing
date), which was the date of actual completion and delivery, of
possession, whereas under the latter, although there is, by clause
18(2), also a formula for the calculation of liquidated damages, it only
specifies the terminus a quo but not the terminus ad quem. In our
view, this difference is a matter of critical substance.
It is obvious from the judgment of the Privy Council in Loh Wai Lian,
that but for the unusual language of clause 17 of the contract of sale,
which had provided a formula for the computation of damages
payable by the developer to the buyer for delays, by defining not
merely the terminus a quo (the opening date) required under r.
12(l)(r) of the 1970 Rules but also the terminus ad quem (the closing
date) - not required under r. 12(l)(r) - the case would have been
differently decided for their Lordships said this:
If the question is asked ‘in the absence of such an express
provision when would the purchaser’s right of action for
damages for breach of contract accrue?’, the answer is plainly
10
the date on which the breach occurred. But parties to a contract
are, of course, entitled to regulate or modify their rights in the
event of breach in any way that they think fit and the accrual of
any cause of action then becomes a matter of the correct
construction of what they have provided. This appeal raises no
point of principle but simply a question of what is the true
construction of the contract in which the parties entered.
In our view, for the reasons stated, Loh Wai Lian is, therefore, readily
distinguishable from the present case, and accordingly, the Judge was,
with respect, wrong in holding that it was of decisive importance to the
question which arose for decision.
It follows, therefore, that our answer to the crucial question aforesaid is;
because the agreement by clause 18(2) had provided for a formula for the
calculation of liquidated damages which defined the terminus a quo (the
opening date) but not the terminus ad quem (the closing date), the
purchaser’s right of action for damages for breach of contract, following the
general rule, accrued on the date of the breach, which in this case was the
day after the time limited under clause 18(2) for the delivery of vacant
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possession, that is to say, on 12 December 1986. Accordingly, the
purchaser having commenced proceedings only on 31 July 1993, was
more than seven months out of time. We are thus driven to the inevitable
conclusion that the purchaser’s claim was statute-barred under the
provisions of s. 6(1) of the Limitation Act, 1953.”
Though the Supreme Court’s sympathies were with the purchaser it
resisted very reluctantly to indulge in them. Parliament has now intervened
to make it very clear that under the Housing Developers (Control and
Licensing) (Amendment) Regulations 2002 and Clause 20(3) now provides
in clear language the following:
“For the avoidance of doubt, any cause of action to claim liquidated
damages by the Purchaser under this clause shall accrue on the date
the Purchaser takes vacant possession of the said Building.”
Perhaps the time has come for Parliament to extend the standard form
Sale and Purchase Agreement in Schedule G, H, I and J to all properties
for so long as they are purchased from a housing developer in a housing
development. Purchasers clearly are in an unequal bargaining position vis-
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à-vis a developer and most developers would not entertain any
amendments to be made to their standard form agreement.
A scrutiny of the relevant clause in the present case shows that there is a
terminus ad quem (the closing date) with respect to the calculation of
agreed liquidated damages in Clause 20.2.2:
“In the event the Developer shall fail to complete and deliver vacant
possession of the Property to the Purchaser within the time specified
or within such extended time as may be allowed by the Developer’s
Building Consultant under 20.2.1 hereof the Developer shall pay to
the Purchaser agreed liquidated damages at the rate of eight per
centum (8%) per annum of the Purchase Price of the Property
calculated from day to day commencing from the due date of delivery
of vacant possession or such extended date as the case may be as
specified in Section 20.2.1 herein to the date of the Vendor’s notice
to the Purchaser to take possession of the Property.” (emphasis
added)
I find that the issue of limitation having set in under s. 6(1) of the Limitation
Act 1953 is without merit.
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When is the date of approval of Building Plans for purposes of calculating
Completion Period.
The Plaintiff also avers that the burden is on the Defendant to prove the
date for the approval of Building Plans and as the Defendant has failed to
disclose the actual date for the said approval it is lawful for the Plaintiff to
rely on Clause 2.1 of the Agreement to compute the amount of liquidated
damages which is due and owing by the Defendant to the Plaintiff and that
date the date of the expiry of the period of waiting for the approval of the
Building Plans which is 12 months from the date of the SPA.
However he who asserts must prove. It is not difficult for the Plaintiff to
make a search of the date of the approval of the Building Plans with the
local authorities. Alternatively the Plaintiff can employ the mechanism of
discovery and interrogatories to arrive at the date which is crucial in
determining when completion should be and hence whether the Plaintiff’s
claim is statute barred. This, the Plaintiff has not done and is going by
assumption that the latest date is 12 months after the date of the SPA.
Whether time has become ‘at large’ with the failure of the Defendant to
obtain the approval of the Building Plans.
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The obligation of the Developer to obtain the approval of the Building Plans
is 12 months from the date of the SPA and it is said that this is a condition
precedent and that time is of the essence.
The Defendant’s counsel submitted that the failure of the Developer to
obtain the approval of the Building Plans on time and the conduct of the
Purchaser in affirming the contract and in making progress payments when
they fall due until the delivery of vacant possession and the taking of the
keys to the Property would bring into play the provision of section 56
Contracts Act 1950:
“56 Effect of failure to perform at fixed time, in contract in which time
is essential.
(1) When a party to a contract promises to do a certain thing at or
before a specified time, or certain things at or before specified
times, and fails to do any such thing at or before the specified
time, the contract, or so much of it as has not been performed,
becomes voidable at the option of the promise, if the intention of
the parties was that time should be of the essence of the contract.
(2) ,,,,,,,,
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(3) Effect of acceptance of performance at time other than that
agreed upon.
If, in case of a contract voidable on account of the promisor’s failure
to perform his promise at the time agreed, the promise accepts
performance of the promise at any time other than that agreed, the
promisee cannot claim compensation for any loss occasioned by the
non-performance of the promise at the time agreed, unless, at the
time of the acceptance, he gives notice to the promisor of his
intention to do so.”
The Defendant’s counsel submitted that there was no notice by the
Purchaser to the Developer at that material time. Time for completion
becomes at large. He referred to the Federal Court case of Sim Chio Huat
v. Wong Ted Fui [1983] CLJ (Rep) 363 where it was held at p.370-371 as
follows:
“….The position is this: If in a contract in which time is of the essence,
a party fails to perform it by the stipulated time, the innocent party has
the right either to rescind the contract, or to treat it as still subsisting.
If he treats it either expressly or by conduct as still continuing, the
contract exists but time ceases to be of essence and becomes at
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large. Consequently he cannot claim the liquidated damages under
the contract unless there is a provision as to the extension of time.
However, this cessation can be revived and so time can be restored
to be of the essence by the innocent party serving a notice to the
party in default giving a new date of completion.(See Hudson, pp. 604
& 612). If this is done there would be a date from which liquidated
damages could be calculated. In the present appeal, at no time did
the respondent give notice to the appellant. Hence clauses 20 and 21
cannot be enforced.”
It is to be noted that the facts in Sim Chio Huat’s case are not very
dissimilar to the instant case. There under clauses 20 and 21, it was
agreed that if the appellant failed to deliver the houses within the agreed
time, he would be liable to pay to the respondent at an agreed sum per
month until the houses were completed with certificate of fitness issued.
Another relevant case referred to is case Hock Huat Iron Foundry v Naga
Tembaga Sdn Bhd [1999] 1 CLJ 89 at p.106 where Malek Ahmad JCA (as
he then was) observed:
“Therefore, since time was no longer of the essence of the contract
by the defendant’s waiver of it by allowing time to pass, the contract
17
could no longer be avoided under s.56(1). However, since the plaintiff
now
had
reasonable
time
(s.47)
to
complete
the
project,
compensation could not be awarded for the delay, This is because
there could not be any delay as the plaintiff had a reasonable time to
complete and in fact was allowed to complete the project.”
Defendant’s counsel also referred to the case of Loh Chow Sang & Anor
v. Meru Valley Resort Bhd [2001] 8 CLJ 410 where the headnotes have
succinctly summarised the decision of Abdul Hamid Embong J (as he then
was) the triable issues in a context not dissimilar to ours as follows:
“[1] A plaintiff will only succeed in obtaining summary judgment in
cases of undoubted certainty. What a defendant needs to do is to
show cause that there is a bona fide triable issue to be given leave to
defend.
[2] The respondent herein had raised issues that the appellants had
acquiesced in the construction works undertaken by the new
management of the respondent, that the Contracts Act 1950 should
be read into the SPA, that the completion date of the house in the
peculiar circumstances of the case was not a fundamental, that by
the new arrangement between the parties the provision of s.7 of the
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SPA that time was of the essence was rendered ineffective, and that
the appellants by continually paying the installments of the purchase
price had waived their right under the SPA. These are triable issues
which either singularly or collectively constituted cause against the
grant of summary judgment.”
I share the same sentiments here and I hold that the defence raised is not
a sham one but one that requires serious consideration that would justify
the matter going for trial.
Whether damages for late delivery has been proved as required under s.
75 Contracts Act 1950.
Section 75 Contracts Act 1950 reads:
“When a contract has been broken, if a sum is named in the
contract as the amount to be paid in case of such breach, …, the
party complaining of the breach is entitled, whether or not actual
damage or loss is proved to have been caused thereby, to receive
from the party who has broken the contract reasonable
compensation not exceeding the amount so named…”
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There is the Federal Court case of Selva Kumar a/l Murugiah v.
Thiagarajah a/l Retnasamy [1995] 2 CLJ 374 where it has been held that
to give a literal construction to the section will produce a most
unreasonable result in that it will change the existing law, which is that a
plaintiff who seeks to recover damages for the actual damage caused
ought to prove them, unless he is content with the symbolic award of
nominal damages.
Plaintiff’s counsel has referred to the case of Sakinas Sdn Bhd v. Siew
Yik Hau & Anor [2002] 3 CLJ 275 where at p. 292 the High Court held:
“As has been seen, the sale and purchase agreement in this case is
a mandatory one that is prescribed by statute. The method of
calculating the liquidated damages for failure to hand over vacant
possession in time is prescribed in the agreement by regulations
made by the Minister. I agree with learned counsel for the appellants
that the method, being prescribed by a subsidiary legislation, in
incapable of overriding s.75 and its effect. But in determining
reasonable compensation under s. 75 the court ought not to
disregard the fact that the Minister, in his wisdom balancing the
interests of house-buyers and developers and after considering the
20
advice of his advisers, considered the method prescribed in cl.22(2)
is a fair method….”
While Sakinas case (supra) deals with the policy behind a social piece of
legislation, here we are dealing with a non-scheduler agreement not in the
scheme or structure of Schedule G or H.
There is a bona fide triable issue here at least with respect to when the
calculation of late completion should start. Here we have no evidence as to
when the Building Plans were approved which doubtless we will have, if not
through discovery and interrogatories, then at the trial where the Defendant
has to give evidence. It will be clearer then as to the period of late delivery
and whether the Plaintiff by conduct has waived the requirement of the
condition precedent of getting the Building Plans approved within 12
months of SPA and whether by conduct, the Plaintiff has or has not waived
the need to complete the Property with 36 months from the date the
Building Plans are approved.
Pronouncement
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All the above considerations are matters best dealt with not through
affidavit evidence as in this application for summary judgment but by
means of viva voce evidence at trial. I hold that there is more than a triable
issue that justify going for trial. Enclosure 5 is hereby dismissed with costs
in the cause.
Dated: 12.11.2010.
Sgd
Y.A. TUAN LEE SWEE SENG
Judicial Commissioner
High Court (Civil Division)
Kuala Lumpur
For the Applicant/Plaintiff: Ms. Heama Latha Nair
(Anthony Chew & Lim)
For the Respondent/ Defendant: Mr. Desmond Choi
(SR Yap, Desmond & Ridzal)
Date of Decision: 24.8.2010
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